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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






2. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






3. Total product divided by labor employed. APL = TPL/L






4. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






5. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






6. A good for which higher income increases demand






7. All firms maximize profit by producing where MR = MC






8. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






9. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






10. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






11. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






12. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






13. A firm that has market power in the factor market (a wage-setter)






14. Exists if a producer can produce a good at lower opportunity cost than all other producers






15. A good for which higher income decreases demand






16. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






17. Costs that change with the level of output. If output is zero - so are TVCs.






18. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






19. Entry of new firms shifts the cost curves for all firms downward






20. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






21. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






22. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






23. TR = P * Qd






24. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






25. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






26. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






27. Exists if a producer can produce more of a good than all other producers






28. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






29. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






30. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






31. 0 < Ei < 1






32. The additional cost incurred from the consumption of the next unit of a good or a service






33. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






34. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






35. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






36. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






37. Two goods are consumer substitutes if they provide essentially the same utility to consumers






38. The imbalance between limited productive resources and unlimited human wants






39. ATC = TC/Q = AFC + AVC






40. The lost net benefit to society caused by a movement away from the competitive market equilibrium






41. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






42. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






43. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






44. MUx / Px = MUy/Py or MUx/MUy = Px/Py






45. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






46. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






47. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






48. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






49. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






50. The ability to set the price above the perfectly competitive level